Comment by skippyboxedhero | Hacker News Reader

Comment by skippyboxedhero | Hacker News Reader

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skippyboxedhero

The problem with this strategy is that most execs don't think through the higher levels (which is what went wrong here).

They think: we will flood this space with money, drive out competition, and then jack up the price.

They don't think: if we spend all this money, we will have to get a return...the product is free today, is there enough juice here? What will consumers pay?

Charging money impacts the level of demand, spending money like this is literally putting a noose around your neck with investors.

I remember when I first saw this happen...I literally couldn't believe it, these execs knew the business, they were so smart, well-incentivized...it had to work. It never does, it is horrible to read about because people get canned (less so in this case, this spending was clearly an extension of a prominent exec's social life) but you just see it every time with these "land grab" strategies.

To be clear, the mistake wasn't the strategy, it wasn't being wrong, the mistake was choosing to flamboyantly set fire to billions of dollars for no reason.

They certainly do think about the reduction of demand due to increasing price. That’s economics 101, and I would not assume a major business executive doesn’t know that.

They must have simply thought that the reduction in demand would be small compared to the increased revenue. They are in an existential battle against heavyweights like Apple, Amazon, and Google for music streaming. Adding exclusive podcasts to try to lock in users seems like a good idea to me from a business perspective.

I absolutely hate the idea as a listener to podcasts though, and I am glad to see it fail.

> They must have simply thought

No, they didn't. Paying $200m for Joe Rogan, $30m for Markle...these deals made no sense regardless of any economic model (as I allude to above, they also did strange deals where they tried to bring in someone from outside podcasting).

And the reason I wrote the meta thing at the end: I have seen companies do this repeatedly and I have seen young equity analysts get caught up in it because they think the same way you are thinking.

Yes, we live in a world where a business exec can waste billions of dollars on a totally unfounded hunch, they don't think it over, they don't look at the numbers, they are just like everyone else and will repeatedly do things that make no sense at all (it is actually far easier for someone who isn't in the industry and without business training to spot this...when people are in this situation and getting paid $10m/year for nothing, they tend to think they are geniuses and everyone else an idiot and end up making decisions like this).

I think you give too much credit to some execs, my experience is that sometimes the short term is the only thing they pay attention to when investors' money is flowing and there's more to grab.

The only reason we see this headline is because dumb money ran out last year'

Well that strategy has worked for other things.

They’re not dumb. They took a bet. Not all bets work out

Podcasts probably just aren’t that profitable. They just don’t have the same pull like a TV show, plus they’re so cheap to produce so there’s always so much competition

What other things? I can think of multiple other situations just in media where this hasn't worked: NFLX, AMZN, Overwatch League, YouTube Gaming/Facebook Gaming/Mixer...there are specific instances of companies doing the opposite (i.e. DIS, they just acquire something working and just pound out low-risk additive investments...and DIS only started doing this after, you guessed it, missing on some very high-risk, big budget investments like John Carter) and it working very well.

But I wasn't even thinking of media. I think it happens most with M&A where a company makes a land-grab investment that is fundamentally defensive in character (I think Spotify felt they needed original content), and it almost never works because it largely comes from execs feeling the need to juice numbers for comp packages rather than actually put down a long-term plan for investing capital (so some much smarter person comes along and tells them they have a solution and basically robs shareholders blind, in this case it was Joe Rogan).

And yes, they are dumb. The dumbness wasn't "the bet" but how they structured it. The investments were so large and aggressive, they were part of the "original content" bubble, the underlying thesis was unknowable, and they have ended up getting targeted by activists because the corporate governance here was so evidently bad (as I said, in this particular case there seems to have been a significant overlap between the social life of a prominent exec involved in this and some of the people being picked up).

> Podcasts probably just aren't that profitable.

You think? I thought their "bet" wasn't dumb.

The chief funders of these businesses have so much money that they often don't care about the outcome of the company as the important factor. Spotify has reshaped the podcast market into a format that the big money funders wanted to happen. It's evolved from the early stage free-for-all where small producers could make it big to a corporate controlled platform in which people have become accustomed to getting their podcast s from something more akin to an app store.

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